Time ticking on benefit action
Social Security problem will only grow larger over time
BY KEN MORITSUGU Knight Ridder Newspapers: Feb.29, 2004

  WASHINGTON - Americans received a rude reminder this week that their future Social Security and Medicare benefits almost certainly will be less than promised.
  It doesn't matter if, as Republicans propose, workers receive individual accounts within Social Security and invest them in the stock market. It doesn't matter if, as Democrats propose, current annual surpluses in the two retirement programs are locked away
  Money still will fall short of what's been promised to an exploding retiree population. The federal government, as Federal Reserve Chairman Alan Greenspan put it in a wake-up call to Congress last week, is "overcommitted."
  In less than a decade, tax revenue for Medicare will fall short of benefit payouts. Social Security will face red ink by 2018.
  Deficits will start small, then mushroom. Revenues will cover only three-fourths of the costs of Medicare in 2026 and of Social Security in 2042. For Social Security, the shortfall will grow from $25 billion in 2018 to $568 billion in 2030 and top $1 trillion in 2040.
  If benefits aren't reduced Greenspan proposes increasing the retirement age and using a less-generous inflation adjustment for payouts - the government will have to raise taxes or borrow money to make up shortfalls. Closing gaps with cuts elsewhere would ravage federal spending.
  But raising taxes could prove self-defeating by strangling the source of revenues. The shortfalls loom so large that the tax increases needed to fill them would threaten economic growth. Borrowing that much money would push up interest rates and stifle the economy. A slower economy would mean fewer goods and services to support a retired population. And as workers' incomes slowed, so would tax revenues.
  In other words, doing nothing now could force decisions down the road, when fewer resources are available. That would be far more painful than doing something today.
  Expert witnesses repeatedly have warned Congress about the looming shortfalls, sparking much talk but no action. President Clinton held a White House conference in 1998. President Bush appointed a study commission in 2001. Politicians love to beat up each other over the issue, but no lawmaker wants to face an election-year charge of raising taxes or cutting benefits.
  "The people in the House and Senate, Republicans and Democrats, are desperate to avoid this issue," said David John, a Social Security expert at the conservative Heritage Foundation in Washington.
  Aside from a handful of lawmakers, "profiles in courage cannot be found on this issue," he said.
  "Nobody is talking about anything involving a hard choice," said Robert Bixby, executive director of the Concord Coalition, a Washington group advocating balanced budgets. "'Whether you agree with a particular solution or not, you're going to have to do something to reduce benefits or raise revenues. That's unassailable."
  With Bush running for re-election, action this year is a lost cause. Conventional wisdom holds that Social Security reform is possible only in a president's second term, when he won't have to face voters again.
  Clinton tried to forge a bipartisan solution with a Republican Congress in his second term, but the Monica Lewinsky scandal soured the mood.
  Bush, if re-elected, could have the advantage of a Republican Congress. Nonetheless, it would take an all-out effort by the White House, with some arm-twisting of reluctant lawmakers, to pass legislation, John said. With such support - which isn't guaranteed - he gives a bill a 60 percent chance of success.
  If a Democrat wins the White House, action likely would await his second term.